Big idea: The housing boom is back - Boehner’s shrinking power - Changing times: States boost spending on colleges - SEC turns back to accounting fraud

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BIG IDEA: THE HOUSING BOOM IS BACK — Pantheon’s Ian Shepherdson notes that the run-up in house prices may help explain why fiscal tightening in Washington is not taking a bigger bite out of the economy: “We didn’t expect to be talking about the impact of rising asset prices on consumption for a while. But net housing wealth probably rose by close to $1.6T in the year to the first quarter, and that’s too big a number to be ignored. It might be responsible, in part, for peoples’ apparent willingness to cut their saving rate in the face of this year’s fiscal tightening and, hence, to continue spending with no visible interruption. Assuming a 1 percent increase in today’s March Case-Shiller report … home prices will have risen by 12.7 percent in the year to the first quarter, the biggest increase since the fourth quarter of 2005”

BOEHNER’S SHRINKING POWER — POLITICO’s Jim VandeHei and Mike Allen: “House Speaker John Boehner, who by title and position should be the second most powerful person in Washington, sure doesn’t seem or sound like it. He has little ability to work his will with fellow House Republicans. He has quit for good his solo efforts to craft a grand bargain on taxes and spending. And he hasn’t bothered to initiate a substantive conversation with President Barack Obama in this calendar year. …

“So is Boehner weak? ‘You’re missing my style, all right?’ Boehner told us in an interview. ‘I don’t need to be out there beating the drum every day. My job as the leader is to build my team, encourage my members, help provide leadership to my members and committee chairs and let the institution work. … His style, in short, is not lean in. Or lean on. It’s lean back — and wait.” http://bit.ly/1asuehq

SCARY: MORGAN STANLEY MOVES EVENT DUE TO BIRD FLU FEAR — Bloomberg’s Bei Hu: “Morgan Stanley … will hold a gathering in New York to showcase Asian hedge funds to investors after pulling its capital introductions event in China because of the bird flu, said three people with knowledge of the matter. Morgan Stanley told managers and investors last month the annual forum scheduled for Shanghai between May 21 and May 23 would be postponed and relocated to New York in July because of health concerns after the avian flu outbreak earlier this year … Xu Li, a Beijing-based spokeswoman of Morgan Stanley, declined to comment on the delay. The response reflects international concern about the new virus, which has killed more than a quarter of the people known to have been infected.

“Some investors and managers declined to travel to Shanghai, said two of the people. Thirty-three cases of the H7N9 avian flu — 13 of them fatal — have been reported in China’s financial center, according to the municipal government. The H7N9 avian flu virus is known to have infected 131 people in China since March and killed 36 of them … It is capable of being spread from human to human, scientists at the Chinese Center for Disease Control and Prevention in Beijing, and the University of Hong Kong said earlier this month after a study.” http://bloom.bg/13VWJUA

THIS MORNING ON POLITICO PRO FINANCE – Jon Prior on House Republicans mulling options for FHA. … To learn more about Pro's subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD TUESDAY MORNING — Hope everyone had a restful Memorial Day Weekend. M.M. is on CNBC’s “Squawk Box” this morning around 8:30 a.m. to join the reporters roundtable on today’s top stories. As always, send your tips and comments: bwhite@politico.com; and follow on Twitter: @morningmoneyben and @POLITICOPro.

DRIVING THE WEEK — Congress remains on Memorial Day recess so expect less action on the IRS and other scandals … Former Fed Chair Paul Volcker speaks Wednesday at the Economic Club of New York … IMF managing director Christine Lagarde speaks Thursday at the Woodrow Wilson Center in Washington … Case-Shiller home prices this morning at 9 a.m. expected to show a gain of 1 percent … Consumer confidence at 10 a.m. expected to rise to a five-year high of 74, up from 68.1 … Second estimate of first quarter GDP on Thursday at 8:30 a.m. expected to be revised down to 2.3 percent from 2.5 percent … Pending homes sales at 10 a.m. on Thursday expected to rise 1.5 percent … Personal income at 8:30 a.m. on Friday expected to rise 0.1 percent while nominal spending is expected to remain flat … University of Michigan consumer sentiment at 9:55 a.m. Friday expected to rise to 83.7 from 76.4 …

CLARIFICATION — An item in Friday’s column said bailed out insurer AIG “owed” part of the estimated TARP cost to taxpayers. In fact, the CBO report said that it included the cost of AIG’s bailout in the current estimate that TARP would cost taxpayers $21 billion. CBO did not say AIG owed any more money to the government.

REINHART/ROGOFF RIP KRUGMAN – POLITICO’s Kevin Robillard: “It’s more like a mixed martial arts brawl than an economic discussion. Two Harvard academics are accusing Paul Krugman of ‘spectacularly uncivil’ behavior, and The New York Times columnist is punching back. Harvard’s Carmen Reinhart and Kenneth Rogoff finally lashed out at Krugman after enduing his relentless criticism of errors in a paper the duo wrote linking high debt to low GDP growth … ‘We admire your past scholarly work, which influences us to this day.

“So it has been with deep disappointment that we have experienced your spectacularly uncivil behavior the past few weeks,’ Reinhart and Rogoff wrote in a letter posted on the former’s website. … Krugman … took the pair to task on Sunday for standing by their contention that growth falls spectacularly after debt exceeds 90 percent of GDP. In a second post — headlined ‘It’s the policy, stupid’ — Krugman asked journalists not to focus on the feud, and more on the impact of economic policymaking.” http://bit.ly/18oeKOW

CHANGING TIMES: STATES BOOST SPENDING ON COLLEGES — WSJ’s Amy Schatz with another example of how an improving economy is erasing the need for austerity and flipping political scripts: “After cutting spending on public colleges and universities during the economic crisis, many state governments have begun to boost higher-education budgets once again. Lawmakers in Indiana recently approved a $500 million funding increase over two years for state colleges and universities, a 14.6 percent increase … New Hampshire's governor has proposed increasing the university budget for the coming academic year by $20 million, or 37 percent.

“And state lawmakers in Florida recently approved a budget that increases higher-education funding by $314 million, or 8.3 percent, following seven years of cuts. …

The new funding reflects the brightening financial picture in many state capitals. Tax revenue in 47 states rose last year, according to Census Bureau data. Government revenue collections for all states increased by an average of 4.5 percent.” http://on.wsj.com/14ZPLxq

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DEAL TUESDAY: BAUSCH & LOMB SELLS ITSELF — NYT’s Michael J. de la Merced: “Bausch & Lomb, the eye care company, agreed on Monday to sell itself to Valeant Pharmaceuticals International of Canada for about $8.7 billion, sidestepping the lengthier process of an [IPO]. Under the terms of the deal, Valeant will pay $4.5 billion to the investor group that owns Bausch & Lomb, led by the private equity firm Warburg Pincus. It will also spend about $4.2 billion to repay Bausch & Lomb’s debt.

The agreement continues the flurry of deal-making in the health care industry, as companies seek to buy the growth they are hard-pressed to generate on their own. Announced merger volume in the sector this year is up 14 percent from the period a year earlier, even as takeovers have fallen 8 percent. … The Bausch & Lomb deal is the company’s biggest, over three times the value of its $2.6 billion purchase of the skin care company Medicis Pharmaceutical last year.” http://nyti.ms/13VLQlM

ICYMI: HIGH-LEVEL ACCESS FOR STOCK PICKERS — WP’s Tom Hamburger: “White House records show that Elizabeth Fowler, [who was then Special Assistant to the President for Healthcare and Economic Policy at the National Economic Council], met with executives from half a dozen investment firms in 2011 and 2012. Among them was Kris Jenner, a stock picker with T. Rowe Price … who managed its $6 billion Health Sciences Fund. Separately, an official in the agency that oversees Medicare and Medicaid spoke in December with managers of hedge funds, pension plans and mutual funds in a conference call.

“The official, Andrew Shin, was pressed during the 50-minute call for information about upcoming Medicare decisions but declined to discuss matters still under agency review … That call and the White House meetings Fowler attended were arranged by political-intelligence firms, an expanding class of consultants … that specialize in providing government information to Wall Street. … Fowler described her sessions with investors as innocuous, discussions of public information of the sort that would be supplied to any group that asked for it.” http://wapo.st/1152XAA

CORKER CRAFTING BIPARTISAN GSE BILL — American Banker’s Donna Borak and Victoria Finkle: “A bipartisan group of senators led by Sen. Bob Corker, R-Tenn. is drafting legislation designed to reform the housing finance system, including a plan to wind down the government-sponsored enterprises. The proposal has been deemed by some as an ‘ambitious solution’ to Fannie Mae and Freddie Mac … and is widely expected to mirror a recent proposal aired by Edward DeMarco, acting director of the Federal Housing Finance Agency. …

“Corker hinted at a Senate Banking Committee hearing in April that his office was collaborating with other lawmakers on a GSE bill that could be in place ‘very, very soon.’ … The new proposal is expected to build on a suggestion first outlined by DeMarco earlier this month, which called for the creation of a specially-chartered financial institution that would pool capital from shareholders and guarantee principal and interest payments to mortgage-backed securities holders.

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SEC TURNS BACK TO ACCOUNTING FRAUD — WSJ’s Jean Eaglesham: “U.S. securities regulators are turning back toward Main Street, renewing their focus on accounting fraud and other financial-disclosure failings. Such cases were long a staple of the [SEC] 's enforcement efforts, leading to more than 25 percent of civil-enforcement actions filed by the agency in its 2003 to 2005 financial years. The financial crisis shifted attention and money elsewhere. … But as the volume of crisis-related cases ebbs, top SEC officials are expected to announce soon a broad shuffling of resources in the agency's enforcement division that will include an increased focus on accounting fraud, according to people close to the agency. …

“The move is led by SEC Chairman Mary Jo White and co-enforcement chiefs George Canellos and Andrew Ceresney, said the people close to the agency. It isn't clear how much money or manpower will be devoted to the effort, though the SEC already is developing a computer program to sift language in financial reports for clues that executives might be misstating results, agency officials say.” http://on.wsj.com/19i0JkK

SUMMERS FOR FED CHAIR? — FT’s Ed Luce: “When Wall Street predicts something will happen in Washington, it is often wise to bet on the opposite. Multiple polls show Janet Yellen, vice-chair of the US Federal Reserve, as the strong favourite to be named Ben Bernanke’s replacement as chair — an announcement that is likely by September. Such certainty is puzzling: there is no evidence … Obama sees Ms Yellen as a shoo-in. Nor does his likely shortlist — which includes two former Treasury secretaries, Larry Summers and Tim Geithner … suggest Ms Yellen as the inescapable choice … It is my bet he will settle on Mr Summers. …

“Since the Fed chairman’s job is to build consensus among sometimes fragile egos, Mr Summers’ abrasiveness would count fatally against him, critics argue. Such worries are exaggerated. Even if he has greatly mellowed in recent years, as his friends insist, charm is overrated. He would make a bad choice as a mediator in Syria. Fortunately, a Fed chairman faces lesser diplomatic challenges. The most important quality is intellectual leadership — something Mr Summers would offer in greater abundance than the others.” http://on.ft.com/16lC00i

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